It’s okay to feel unsure
It’s fine to not know
Keep in mind that uncertainty doesn’t last forever
Clarity always finds its way out of the chaos!
-Wisequotes
Why are we having market turbulence this year?
First, we have had an unprecedented influx of money into the economy to get us through the COVID shutdown.
Second, people started spending the money they saved during the shutdown.
Third, the supply of goods is less than before because of the shutdown.
Too much money chasing too few goods yields inflation.
The Federal Reserve combats inflation by raising interest rates to S L O W down spending. If you have to pay more for something, you may be inclined to wait to purchase, right?
For example, I mentioned in the previous Finger Financial Five that Elliott totaled his car and was uninjured. The interest rate on that car loan was .9%. Interest on a new car loan would be 5.9%. I am not interested in borrowing money at that price! Therefore, I can either pay with cash or not purchase. Hence, a potential economic slowdown in the Finger household. (Don’t thank me yet for slowing the economy down. I may pay cash for the vehicle.)
Back to the turbulence…
The first half of 2022 has been the worst start to a year for bonds and 3rd worst start for stocks…
And volatility has picked up…
Ok Jeremy, what do we do about the turbulence??
Let me share with you a story…
My wife and son are nervous flyers. When there is any turbulence, they white-knuckle the armrest. I, on the other hand, am not bothered.
Why?
I focus on the data…
According to the Massachusetts Institute of Technology, the risk of death in a commercial flight is 1 in 7 million. Meaning that, if I were to fly every day of my life, it would take 19,000 years before I die, statistically speaking.
If I invest in stocks over the long term, the odds are in my favor, as well…
My dad was a pilot — he would tell me that most crashes are due to pilot error. People would not go through their checklist nor trust their instruments.
You can see in the chart above that the average investor underperforms greatly due to “pilot error.”
Sticking to a checklist could improve results.
Some checklist items include:
- Live within means — check
- Proper investment allocation — check
- Time horizon matches your goals — check
- Estate plan in place — check
- 6-24 months of cash — check
- 2 gallons of ice-cream — check. (No judging. It’s on my list!)
My dad would say when you can’t see, you have to rely on your instruments. What you feel may not be real. You can get disoriented and make fatal mistakes. The instruments help guide you through the fog.
Same is true financially…
Here is an example of a financial “instrument panel.”
Are you white knuckling through these economic times? Would you like to see if your instruments say you are on the right track? Click here to setup a time to chat. Happy to help!
On the lighter side, I went on a father-son trip to see a rap concert in Raleigh this weekend. Elliott’s choice, of course. I didn’t know a single song, but they really put on a performance! He and I had a great time.
Hope all is well with you and your family,
Jeremy
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.
This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
